ARGENTINA: An Introduction to FinTech Legal

INNOVATIONS IN TECHNOLOGY AND FINANCE 

The convergence of the financial services and technology industries has resulted in a great opportunity for players in these two sectors to invest in new projects and add efficiency to their current operations in Argentina. Such opportunity entails great legal challenges too.

In recent years, the Argentine government has taken a proactive regulatory approach encompassing banks, financial institutions, and technology businesses. Although Argentina does not have a comprehensive fintech law, the Argentine Central Bank and the Argentine Securities and Exchange Commission have employed separate regulations that indirectly relate to technology applied to financial innovation, covering the following business: immediate payment, e-commerce, financial scoring, payment service providers, digital wallets, QR codes, open banking, cryptocurrencies, information services and data protection, among others.

So far, these regulations have encountered the exponential and sustained growth of the payment market and financial innovation industry in general, promoting financial inclusion and competition. In addition, such growth was encouraged by the need of digitalisation resulting from the COVID-19 pandemic.

Transferencias 3.0 

The most significant innovation was the development of a new real-time payment scheme named “Transferencias 3.0” in December 2020, as a step forward in the regulation of payment market in Argentina. By means of Transferencias 3.0 payment scheme, the Central Bank introduced a new “Standardised Payments Interface” that allows the matching of payments through an open and interoperable digital ecosystem in the frame of the Argentine National Payment System. Particularly, Transferencias 3.0 regulations incorporates an automatic and irrevocable accreditation payment system, which will be available 24 hours a day seven days a week. Transferencias 3.0 payment system is comprised mainly of the following participants: 1) a payer; 2) a receiver; 3) one or more financial institutions, banks and/or PSP; and 4) an administrator. As regards the latter, the entities registered by the Central Bank to function as administrators so far are: Compensadora Electrónica S.A., Interbanking S.A., Prisma Medios de Pago S.A. and Red Link S.A.

Digital Wallets 

On the digital wallets front, the Central Bank has provided regulations broadening the payment systems towards the interoperability of the market. Payment service providers, digital wallets and the reading of rapid response codes (QR codes) were key factors in the development of this goal. Particularly, Central Bank regulations contemplate two types of payment service providers: (i) Payment Service Providers “who offer virtual payment accounts” (“PSPCP”); and (ii) Payment Service Providers “who perform payment initiation activities” (ie, digital wallet services) (“PSI”). Both PSPCPs and PSIs shall be registered with the Registry of Payment Service Providers of the Central Bank. Central Bank regulations provide that PSPCPs, PSIs, financial institutions and banks who allow the initiation of payments with interoperable QR codes must be registered in the “Registry of Interoperable Mobile Wallets”. With regards to QR codes, any and all PSPCPs, PSIs, financial institutions and banks that make available to their clients the reading of QR codes must adapt their systems to allow the capture of QR codes associated with any request for payment, without discrimination. Hence, the “administrators” of T3.0 payment scheme in no case may enable an acceptor to receive transfer payments initiated with QR codes, if they have not verified that such QR codes can be read by all PSPCPs, PSIs, financial institutions and banks.

Open Banking  

With regards to open banking legal framework, there are not specific regulations in Argentina. In this respect, Argentina does not have an open banking law (similar to the European model developed in recent years). Nevertheless, in the Argentine market practice, companies have launched their business incorporating some of the principal characteristics from the European model for the commencement of the development of the open banking system (eg, launched open APIs into the market, which is one of the fundamental pillars of open banking, and implemented platforms which allow clients to access all their bank accounts in different entities). Additionally, the Central Bank has enacted a specific piece of regulation directly related to open banking, establishing that payment service providers who also offer digital wallet services must allow the initiation of payments from any virtual account or bank account, even if such account is opened at a different payment service provider.

Given the latency of the regulation, it is uncertain how the Central Bank will implement and adopt it in practical terms. In addition, it is worth mentioning that in order to develop open banking in Argentina, it will be necessary to establish the rules and standards for the protection of personal data and cybersecurity.

Crypto-assets and Cryptocurrencies 

With respect to crypto-assets characterisation in Argentina, pursuant to a joint letter issued by the Central Bank and the Argentine Securities and Exchange Commission: “Crypto-assets which are intended to be used as payment instruments or for investment purposes are not issued or backed by a central bank or governmental authority and do not qualify as legal tender or negotiable instruments”. In this sense, the Central Bank and CNV have defined crypto-assets as “a digital representation of value or rights that are transferred and stored electronically using Distributed Ledger Technology (DLT) or other similar technology. While these technologies could help promote greater financial efficiency and innovation, crypto-assets are not legal tender”. Given that beyond this definition there is no general classification of crypto-assets, and that cryptocurrencies cannot be defined as currency or security in Argentina, they are classified as intangible assets, in accordance with Article 16 of the Argentine Civil and Commercial Code, since they have a patrimonial value.

With respect to Central Bank regulations, some regulations that pertain to cryptocurrencies and crypto-assets were enacted in recent years. For example, Communiqué “A” 6823 issued in 2019, which prevents the use of cards (issued by local entities) for the “acquisition of crypto-assets in their different modalities” in foreign exchanges. In addition, by means of Communiqué “A” 7510, the Central Bank incorporated a prohibition of banks and financial institutions from carrying out and facilitating their clients to perform transactions with digital assets (including crypto-assets). The main purpose of this regulation is to discourage the offer of crypto-assets through the financial system and reinforce the idea that financial activity should be focused on “finance investment, production, commercialisation, consumption of goods and services required by both domestic demand and exports”.

Conclusion  

The Central Bank is constantly pursuing the simplification and innovation of financial services in order to reach a larger number of consumers, and particularly to include the ones currently unbanked. In that respect, we have seen in the recent years a significant development of new players in the financial innovation and FinTech markets in Argentina. This presents a great challenge for the Central Bank and other regulators in Argentina to introduce, in future years, the right and balanced regulations that permit the growth of the existing FinTech companies, and at the same time, the development of new players in the market.